Macro Pulse

Beyond the headlines

Soft landing narratives have remained in vogue in financial markets in recent weeks, partly due to weaker-than-expected US inflation data. In contrast, this week’s stronger-than-expected UK service sector CPI inflation data unsettled investors and probably played a role in the Bank of England's decision to keep interest rates unchanged. In our charts this week we home in on:
·       US inflation surprises
·       Wage growth in the US and Europe
·       European political uncertainty
·       China’s property market
·       Japan’s trade
·       Global equity sector returns

Energising the politics

A debate about the precise timing of a Fed rate cut has continued to dominate financial market sentiment in recent days. A nod from the Fed acknowledging progress in fighting inflation, coupled with weaker-than-expected CPI data, has, in particular, kept hopes of a soft landing for the US economy alive. In our charts this week we focus on:
·       US inflation
·       The UK economy
·       Consensus growth forecasts
·       The energy transition and climate change
·       China’s trade
·       The US dollar and global trade

Politics and Economics

A further batch of disappointing US growth data, coupled with policy rate cuts from the Bank of Canada and the European Central Bank, have continued to re-energize easing narratives in financial markets over the past few days. But politics has also been grabbing the headlines thanks to some unexpected election results from e.g. India and South Africa. In our charts this week we delve into:
·       Global household purchasing power
·       Policy uncertainty
·       Oil prices and global growth
·       US manufacturing activity and EM trade
·       Japan’s wage inflation
·       China’s NEV production

Oil consuming

Expectations about when exactly central banks will begin an easing cycle have remained a dominant driver of financial market trends in recent weeks. But in the background to this, heightened enthusiasm for the rollout of Artificial Intelligence infrastructure, reinforced by stellar corporate earnings reports, have additionally contributed to an upbeat mood. In our charts this week we home in on the following:
·       Consumer confidence in the US and Europe
·       Energy and consumer confidence
·       Broad money supply growth in the euro area
·       High frequency gauges of labour market activity
·       The UK’s net IIP position
·       China’s export growth in selected sectors

The Chips Are Up Again

In the absence of top-tier economic data, corporate earnings reports, particularly from the technology sector, have played a big role in shaping financial market sentiment over the past few days. In our charts this week we home in on:
·         South Korean trade
·         European policy uncertainty
·         US and UK data surprises
·         UK inflation
·         Copper prices
·         Renewable energy use

Reversal of fortune

A Fed easing narrative has been re-energized over the past few days largely thanks to a slightly weaker than expected US CPI report this week but, more generally, because of a battery of weaker-than-expected US data over the past couple of weeks. In our charts this week we examine the following:
·       Consensus growth expectations for 2024
·       GDP growth in advanced economies in  Q1
·       The German economy’s under-performance
·       A slowing UK labour market
·       US immigration
·       Global food price inflation

Inflation still holds the key

Last week's softer-than-expected US data releases have sparked renewed hopes that the Federal Reserve may initiate an easing cycle in the coming months, and, in doing so, have reignited investors' appetite for risk. This week, our charts explore the following:
·       The US economic outlook
·       US momentum versus RoW momentum
·       Global inflation surprises
·       Oil and US yields
·       Global supply chain pressures
·       Asian FX market performance

Policy Surprises Versus Data Surprises

Lingering concerns about the US Fed's inclination to lower interest rates in coming months have continued to unsettle financial markets over the past few days. That said, comments from Fed Chair Powell after this week’s FOMC meeting have calmed some of those nerves. In our charts this week we delve into the following issues:
·         The latest Blue Chip consensus for policy rates
·         US growth surprises and 2-year yields
·         The euro and relative growth surprises
·         Japan’s retail sales activity
·         China’s aircraft movements
·         Water levels on the Panama Canal

Flash Dance

Following a week in which the risks to the global economic outlook suddenly skewed to the downside, the pendulum has swung back again over the past few days. Confidence in a soft landing for the world economy has instead now re-surfaced partly thanks to firmer-than-expected global economic data, together with some solid corporate earnings reports from the United States. In our charts this week we delve into:
·         The global business cycle
·         Copper prices
·         Semiconductor trade
·         Monetary policy transmission
·         US fiscal policy support
·         Euro area financial balances

Geopolitics, oil, the IMF and China

Investors have grown increasingly cautious about the economic outlook in recent days, partly thanks to heightened geopolitical instability in the Middle East. That Fed Chair Powell has also expressed greater concern about the US inflation outlook has not helped, not least as higher oil prices (and the resilience of the US economy) had already been unsettling investors’ inflation expectations. In our charts this week we focus on:
·       The IMF’s latest economic forecasts
·       Geopolitical risk and oil prices
·       Global oil reserves
·       US Treasury yields versus oil prices
·       US financial conditions and economic growth
·       China’s economic growth in Q1